November 20, 1997 7:00 PM PST

Justice counters MS claims

A top Microsoft (MSFT) executive suggested last year that the company should "leverage Windows more" to promote its Internet Explorer browser, the Justice Department said in a court document filed today, its latest attempt to show that the software giant was engaged in unfair business practices.

The document added that Microsoft senior vice president Jim Allchin was still referring to Explorer as "an add-on to Windows" less than a year ago, rather than an integral part of the operating system.

The statement, made in an a December 1996 email message, was part of a 25-page reply memorandum bolstering government claims that the company violated a 1995 consent decree. It refutes claims Microsoft made in a filing ten days ago, in which it argued that the Justice Department knew the company planned to build Internet capabilities into Windows before the two parties signed a settlement in 1994.

A Microsoft spokesman disputed the government allegations and called the email "a great example of selective use of facts." Instead, the spokesman stood by evidence supplied by Microsoft in its court filing, which he said demonstrates that the government was on notice as early as 1993 that Microsoft planned to integrate the browser.

"The government knew full well that Internet technology would be part of Windows 95 before it negotiated and signed the consent decree with Microsoft," company spokesman Greg Shaw said. "That's really what the case is about."

That point isn't lost on the government, as its brief today made abundantly clear. Through a number of internal Microsoft communications, federal attorneys attempted to counter the company's contention that it long intended to integrate the two technologies and that it clearly conveyed that intention to the government.

"The sequence of documents demonstrates not only that the United States was not on notice of the alleged 'integration' of Internet Explorer, but that in fact Internet Explorer was not designed or 'developed' to be an integrated product with Windows 95," the government argued.

The most dramatic piece of evidence submitted was the email sent by Allchin, who now heads Microsoft's personal and business systems group.

"I don't understand how IE is going to win," Allchin wrote in an email to Paul Maritz, now group vice president for Microsoft's platforms and applications group. "The current path is simply to copy everything that Netscape does, packaging and product wise...My conclusion is that we must leverage Windows more. Treating IE as just an add-on to Windows [is] losing our biggest advantage--Windows market share."

In addition to Allchin's email, the government also cited a number of other documents, including:

  • an April 1994 email to Steven Sinofsky, an executive in charge of Microsoft's office products unit, in which he is told that applications such as Mosaic would be supplied by third parties. (Mosaic was the only browser application on the market at the time.)

  • a June 1994 email in which Sinofsky states, "We do not currently plan on any other client software, especially something like Mosaic."

  • a January 1995 draft press document covering Microsoft's licensing of Mosaic, which states flatly that "there are no plans to ship...the Mosaic software in the Windows 95 box when it ships in August of this year."

    Today's filing attempts to poke holes in other Microsoft defenses as well, including the contention that a consent decree provision allowing for "integrated products" gives Microsoft wide latitude to force PC makers to carry IE if they want to license Windows.

    "Microsoft has proposed an arid, senseless reading of 'developing integrated products' that would render [the consent decree provision] meaningless," the government argued. "Indeed, in its discussions with the government before the petition was filed [last month], Microsoft flatly stated that its interpretation of the final judgment would enable it to require OEMs [original equipment makers] to put 'orange juice' or 'a ham sandwich' in the box with a PC preinstalled with Windows 95."

    The government went on to say that, while the consent decree expressly permits Microsoft to "develop new, integrated products," it "may not condition an OEM's license to Windows 95 on the OEM's acceptance of what, in the ordinary commercial and antitrust sense, Microsoft distributes, markets, or otherwise treats as an 'other,' separate product."

    The brief is the last document scheduled to be submitted before U.S. District Judge Thomas Jackson holds a December 5 hearing that is expected to provide the first clues as to how he plans to handle the case. In its court brief, Microsoft requested an extensive fact-finding process, in which it would be permitted to collect voluminous documents and take depositions.

    The government, on the other hand, is seeking an expedited process, in which the so-called discovery phase would be relatively short. In today's brief, it argued that the circumstances surrounding the case require that a decision blocking Microsoft's marketing of IE should be issued within the next few months.

    "This is a matter of considerable urgency," the government argued in today's brief. "Microsoft has stated that it intends to require OEMs to license and preinstall IE 4.0 beginning in February 1998 for new PC product lines, and most OEMs must begin to take significant steps to prepare for such preinstallation 60 to 90 days in advance--which means almost immediately."

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